Latest Update : Feb.13, 2007

Back to Financial Results (FY3/2007)

Investor Conference Call for 3Q FY 3/2007 held on February 1, 2007

* Some parts have been added and modified for a clearer understanding.


Question and Answer

The scope of improvement in keyboards is not all that great yet, but monthly results do show month-by-month improvement.
That's correct.
We would like to bring the spindle motor business back into the black this fiscal year. In the first quarter, we broke even, but we saw further improvement in the second quarter on increased sales of 2.5 inch motors. Since we unfortunately slipped into the red in the third quarter, we want to get back into the black in the fourth quarter and achieve our goal of recording a profit for the full fiscal year. We think the key to this will be overall production and sales volume and 2.5 inch motors sales volume. Looking at January results, sales appeared strong.
Moreover, earnings from information motors have stabilized, and we want to work to take this business to the next level. We are planning another round of restructuring for vibration motors and DC brush motors in the fourth quarter, and therefore think we will see further improvement.
Since the effect of improvement in keyboards is being seen every month, we think that by steadily undergoing structural reforms, we can achieve the target to break even in March.
In other business, lighting devices are a negative factor in earnings. Sales inevitably decline from December to February due to seasonal factors, and since the impact of this was felt this fiscal year as well, minimizing this impact will become a key point.
Moreover, while speakers earnings had been improving, they fell into the red in the third quarter, and we want to bring this business back on track and realize sufficient profit.
Average monthly sales volume in the third quarter was around 4.5 million units. For the fourth quarter, we forecast average monthly sales of over 5 million units.
Since we have high fixed expenses, we think that increasing volume will have a great impact on earnings.
We are planning further structural reforms in February and we think the effects of this will likely be felt in March. Moreover, since the order environment is favorable, we think there is not much concern about information motors.
At the time of the first half earnings announcement, we said that structural reforms were around two months behind schedule, but now we have been making steady progress with cutbacks. Since the Chinese New Year is in February, if we can finalize changes in the line formation and start production in March under properly organized conditions, we think we can break even in March. Moreover, we are proceeding with eliminating unprofitable models and steadily raising average unit prices in addition to eliminating molds and unnecessary assets as production decreases. Since depreciation expenses and personnel costs have started to decline sharply, we think through the synergistic effect of all these factors, we can return to profitability.
Around half of our sales are made in US dollars, and since we also deal in yen, the euro and the respective currencies of other countries, it is difficult to make calculations about the Thai baht alone. Expenses that arise for imported materials come on a foreign currency basis, not only the Thai baht, but in various currencies. However, making a calculation based on a certain set of conditions, from the second to the third quarter, foreign exchange fluctuations had a negative impact to the tune of around 500 million yen companywide. The weak yen had a positive effect, but at our major production hubs, the strong Chinese yuan and the strong Thai baht were negative elements.
We have not changed our basic stance on this.
Average monthly in-house sales were 64 million units and average monthly external sales totaled 114 million units.
We have been cutting the ball bearing inventory that the pivot assembly division held, but since that is almost completed, we are expecting an increase in in-house sales in the fourth quarter.
External sales volume declined considerably, with the monthly average of 120 million units in the second quarter dropping to a monthly average of 114 million units in the third quarter. In December, the Christmas holidays in Europe and the US had a large impact. Further, we think there was a small inventory adjustment in December for ball bearings for use in PC fan motors.
We think external sales will recover to a monthly average of somewhere between 118 million units to 120 million units. We expect the monthly average for in-house sales to be between 65 million to 66 million units.
Yes, we think so. Machined components profits dropped by around 0.3 billion yen from the second to the third quarter, but this was due to the lack of sales growth in ball bearings and rod-end bearings in December.
Monthly average sales volume in the second quarter was around 22 million units, but this is showing a slight upward trend, with sales volume increasing to 23 million units in the third quarter. We think that fourth quarter sales will be virtually flat or could possibly climb to an average of nearly 24 million units per month.
Sales were strong in October and November, but there was a period of inventory adjustment in December.
Yes, I think so. We think there is no great cause for concern in this area.
There was around one billion yen in income tax refunds. In Singapore, there was an income tax refund associated with dividends, but if that hadn't arisen, the tax rate in the third quarter would have been around 38%.
We have not fully compiled the numbers for January yet, but on a preliminary basis, monthly sales averaged over 5.5 million units.
2.5 inch motors have not grown all that much yet, but sales increased for 3.5 inch motors for use in desktop computers, high-end applications and servers. We have finalized the approval process for the new 2.5 inch type that had seen a delay and since we think production and sales of it will increase from March, we think it is highly likely that we will reach an average of 5 million units sold per month in the fourth quarter as long as no particular problems occur.
We think we are sure to see increased sales volume for the 2.5 inch motors. We think at the very least, the numbers will surpass those of the fourth quarter of this fiscal year.
Overall HDD spindle motor sales volume in the third quarter was an average 4.5 million units per month, of which 2.5 inch motors accounted for around 5% of the total. Since they accounted for over 10% of the total in the second quarter, this was a volume decrease of over 50%. In the fourth quarter, sales volume was still not all that great in January, but it will increase in February and March. Since the overall number will increase, we are hoping they can recover to somewhere between the 5% to 10% level.
They were already launched in January. Please bear in mind that the numbers will gradually pick up.
Although the volume is small, from the third quarter we have already made deliveries to a second company. From the latter half of the fourth quarter we will see a full-fledged increase.
Initial costs can be expected to arise over the first month or so, but since these already arose in the third quarter, we do not think any great costs will arise in the fourth quarter. In fact, we think that the increased volume will greatly benefit the components division.
The speakers business is unavoidably affected by seasonal factors. Our speakers are divided into four divisions: speakers for use in audio equipment, automobiles, PCs and microspeakers. Once the Christmas shopping season is over, sales of speakers for audio equipment and PCs slump, and this fiscal year, we think sales fell off a little earlier than usual. Although we posted a loss, it was a small loss, and we are sure we can recover. This business was in the red in the previous fiscal year as well, and if we consider that the business was posting losses even before then, we think we have made great progress. That's why we think that if we can further improve and reach the next level, we will create a business that can overcome these kinds of seasonal factors.
October and November did not see great improvement, but it improved dramatically in December. At the moment, since we are proceeding with various measures such as eliminating fixed assets, conditions are not normal and there are extraordinary factors at play so we cannot fully say that these are the actual conditions. That said, if you look at the expense cuts and average unit prices, we are making steady progress.
They are not at the break-even stage yet, but losses have contracted to the under 100 million yen level.
We are switching to new models in 2.5 inch and 3.5 inch motors, but owing to a late start in the development of our new 2.5 inch type, there were delays in gaining the approval and the period for starting production.
Yes, that is correct.

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